Plum FOI Reveals 45,000 Lifetime ISA Savers Hit With Multiple Penalties in Single Year

New data from smart money app Plum reveals that 45,000 Lifetime ISA savers faced multiple unauthorised withdrawal penalties in the 2024-25 tax year. This figure, previously unavailable to the Treasury Committee, highlights the financial friction within the current home-ownership savings framework as the government prepares to transition to a new First Time Buyer ISA model.

What was announced

Data obtained via a Freedom of Information request by Plum has revealed that approximately 45,000 Lifetime ISA (LISA) savers were hit with multiple unauthorised withdrawal charges during the 2024–25 tax year. This group represents roughly one-third of the 129,200 total individuals penalised in that period. The findings are particularly significant as they provide data that HMRC previously informed the Treasury Committee could not be produced within a requested timeframe during their report published in June last year.

The financial impact on these savers is substantial. The average individual penalised more than once lost a cumulative £760 over the year. More extreme cases saw 3,970 savers incurring combined fines exceeding £2,000, while the top 25 individuals faced average penalties of more than £11,000 each. Under current LISA rules, a 25% penalty is applied to any withdrawal not used for a first home purchase or retirement after age 60. This mechanism means a saver who deposits £1,000 and receives a £250 government bonus would lose £312.50 upon withdrawing the full £1,250, leaving them with just £937.50—less than their original principal.

Plum’s report also highlights the £450,000 property value cap, which has remained unchanged for nine years. The company is calling for this limit to be raised to £600,000 to reflect house price inflation. The government currently intends to replace the LISA with a First Time Buyer ISA, which is expected to remove the retirement savings option and eliminate cash withdrawal penalties by only applying the bonus at the point of purchase.

"More than 45,000 people have been stung with multiple penalties in the space of a single year when they’ve been doing the right thing and using a LISA to help their homeownership dreams become a reality. This includes more than 11,000 savers who lost more than £1,000."

Rajan Lakhani, Personal Finance Expert at Plum.

The companies involved

Plum is a fintech firm that operates a smart money app, accessible via plumhq.com, which focuses on automating the saving and investment process for its users. The company has positioned itself as a consumer-centric platform that uses technology to simplify complex financial decisions. Within the broader fintech market, Plum is recognised for its advocacy on behalf of retail savers, frequently highlighting areas where traditional financial products or government schemes may be disadvantageous to the average consumer. The company does not have a corporate parent or any former names associated with its brand. Its presence in the UK market is defined by its efforts to democratise access to wealth-building tools, particularly for younger demographics who are navigating the challenges of the current housing market and inflationary pressures. Rajan Lakhani serves as the Director of Communications and Brand at the company.

What FF News has reported before

FF News has previously tracked Plum’s operational growth and infrastructure developments. In August 2026, we reported on how Plum Selects Upvest to Power UK Investment Infrastructure in Major Expansion. This move was designed to bolster the firm's investment capabilities within the UK market, providing a more robust framework for its users to manage their portfolios. Such infrastructure upgrades are critical as the company continues to advocate for more flexible and fair savings products for first-time buyers, ensuring their platform can support evolving regulatory requirements and new product wrappers like the proposed First Time Buyer ISA.

What this means

The current LISA structure effectively penalises savers for financial flexibility, a trait that is increasingly necessary in a volatile economy. By applying a 25% charge on the total pot, the government is not just reclaiming its bonus but is actively eroding the personal savings of individuals who may need to access their funds for emergencies or because they have been priced out of the housing market. The proposed First Time Buyer ISA suggests a necessary pivot toward a more protective savings model. However, until the £450,000 property cap is addressed, any new product will likely continue to disadvantage buyers in the UK’s most expensive regions, leaving a significant portion of the market underserved.